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Tell Your Reps

When the markets headed south, investors started seeking more investment advice. The do-it-yourself days appeared to be over and the financial adviser became an ever more important part of the retail sales efforts for mutual fund firms.

And after Sept. 11, the desire for advice and leadership from investors intensified to levels never seen before, according to John Bowen.

Bowen is CEO of CEG Worldwide, a research and advisory firm specializing in financial advisers. He spoke earlier this month at a Royal Alliance asset management conference for its affiliated financial reps.

Bowen drew his conclusions from a study CEG did that was commissioned the third week after Sept. 11 by Merrill Lynch Investment Managers. The survey of investors looked at their relationships with their financial advisers.

Of the 2,369 investors surveyed, 95% said they are scared by their recent stock market experience and 87% said they wanted to work with a financial adviser. The latter number is more than twice as high as CEG has ever recorded, Bowen said.

A Lack of Contact

During the first two weeks after Sept. 11, only 24% of affluent clients (more than $1 million in investible assets) and 16.9% of retail investors ($100,000 to $1 million) said they had personal contact, via phone or in person, from their financial adviser.

Those few advisers who did make phone calls did not regret it. "What we found," said Bowen, "was that putting something up on a Web site had no value, sending an e-mail had almost no value, sending a letter had some value, calling had a lot of value and a face-to-face meeting was ideal. But the big change was between calling and not calling."

The best way to gauge the value of the contact is by looking at what the investors said about their advisers, and more importantly the action taken. About 97% of those personally contacted said they were highly satisfied with their primary investment advice, versus 14% of those who were not contacted.

A Personal Touch Pays

But does that higher satisfaction readily translate into assets? Apparently so. Of those contacted personally, 75% said they were likely to move more assets to their adviser. Less than 1% of those not contacted said they were likely to do so. And 99% of those contacted said that they followed the advice given to them by their adviser, meaning that they were far less likely to pull money out of the stock market.

"There has never been a time when that's been the case," said Bowen. "Think about it. [Virtually] every single one said they followed the advice to the letter. People are looking for leadership right now."

The primary source for new business for most advisers is referrals, said Bowen. Nearly 75% of investors who are personally contacted said they were willing to refer their adviser, while less than half a percent of those not contacted said they were. In fact, of those not contacted, over a quarter said they were going to look for a new adviser. Not a single contacted person said that.

All of the data exemplifies the point that a financial adviser's core business is client relationship management, not asset allocation, said Bowen. What separates successful advisers from those that are less so is not their investment talent but whether they are investment-centered advisers or client-centered advisers, he said.

Part of that can be seen in the fact that most of what advisers and clients talked about following Sept. 11 was not investment related. Over 93% talked about how the clients was doing emotionally, 87% asked how the client's family and friends were doing, and 41% talked about what the government was or should have been doing, according to CEG. Compare that to 16% who talked about investing, 8% who discussed the stock market in the short-term and 7% who discussed the market in the long-term.

"Your business is client relationship management," said Bowen. "That needs to be your top priority. Over 35% of you said you didn't call because you thought they would be upset if you called. Trust me, they'd be upset if you didn't."